Private sector growth slows down but hiring holds

Employment rose for the 12th consecutive month, the longest uninterrupted period of job creation since 2019. [iStockphoto]

The private sector started the year on a cautious note as business growth slowed to a four-month low in January, weighed down by a slump in construction and retail activity, a new survey shows.

The closely watched Stanbic Bank Kenya Purchasing Managers’ Index (PMI) dropped to 51.9 in January, down from 53.7 in December. 

While any reading above 50 indicates expansion, the decline marks the joint-weakest performance since last September, signaling that the late-2025 momentum is cooling, the survey shows.

Despite the slowdown in new orders, the survey highlighted a resilient labour market in relief for job seekers. 

Employment rose for the 12th consecutive month, the longest uninterrupted period of job creation since 2019. 

Firms continued to hire to clear a sharp backlog of unfinished work, which saw its fastest rate of decline since April 2021.

“The PMI releases for January 2026 continue to show a robust private sector. Despite slightly lower output, new order and employment growth, January metrics were positive, confirming a sustained expansion of activity in the private sector,” said Christopher Legilisho, an economist at Standard Bank.

“Marketing efforts by firms and customer referrals helped to sustain activity.  Furthermore, firms reported that improved access to credit enabled increased output. There is also growing optimism about output expectations over the next 12 months.”

The data revealed a sharp divide across the economy. While manufacturing firms reported solid sales growth, the construction, wholesale and retail sectors saw demand contract outright.

Firms also grappled with rising operational costs, citing higher taxes, import fees and raw material prices. 

A “price war” also appeared to be brewing. This intense competition prevented many businesses from passing these higher costs to consumers, helping to keep overall inflation in check.

Business optimism for the next 12 months also rose to a five-month high. Companies expressed confidence that planned expansions, aggressive marketing and new product lines would drive a rebound.